Blogs
In the Summer of 2014, we wrote about a Chapter 7 bankruptcy case in the U.S. Bankruptcy Court for the Western District of Michigan (the “Bankruptcy Court”) involving an intra-family squabble. Our analysis focused on the Bankruptcy Court’s decision related to cross motions for summary judgment filed by the parties, and whether the doctrine of “collateral estoppel ”was applicable to the claims being asserted by the parties in an adversary proceeding pending in the bankruptcy.
While bankruptcy offers a fresh start to debtors, it’s not always a fast fresh start, as evidenced by the fact that the Bankruptcy Court recently published another opinion in the same adversary proceeding relating to a similar claim and again analyzing the applicability of collateral estoppel. Read More ›
Tags: Chapter 7, Western District of Michigan
When Chapter 13 Makes Sense There are certain circumstances where chapter 13 makes perfect sense even though there may not be a lot of debt being repaid. A perfect example of this would be if a person’s driver’s license is suspended due to failure to pay parking tickets to the City of Chicago. Let’s say+ Read More
The post Chapter 13 Filing With Limited Debts appeared first on David M. Siegel.
Chance For Dismissal This is a question that comes up on nearly every chapter 13 bankruptcy case that is filed. It is almost impossible to make it through the chapter 13 filing process without some sort of difficulty. The difficulty might stem from the trustee, a creditor, the regulations, or the debtor himself. There are+ Read More
The post Is My Chapter 13 Bankruptcy Case On The Verge Of Dismissal? appeared first on David M. Siegel.
Working with clients who fall into debt traps has made me cautious about using credit cards. That’s an understatement. I’m paranoid when it comes to debt. I pay off all personal and business credit card debts in full and never carry a balance. In fact, I pay the accounts weekly so I don’t carry a balance on my credit report. (That actually helps boost a credit score.)
So, I was surprised when the folks at the Debt Reduction Center sent me this advertisement letter.
How this company estimated that I might owe $25,000 of creditor balances is beyond me, but I’m sure it has something to do with what I could owe if I decided to maximize my lines of credit. However, as I said before, I don’t carry a balance and I never pay late, so it was surprising to get the letter.
I can only assume that everyone in America with a credit card is getting these letters, whether or not they are experiencing debt problems.
But even if I was $25,000 in credit card debt, is it really true that I could settle my way out of the problem for only $375 per month over 36 months? Gosh, that seems hard to believe. To pay off $25,000 of credit card debt with an average interest rate of 19% would require a $916 payment over 37 months. I can see where many folks would find this offer attractive.
Will this settlement plan actually work? Can you settle $25,000 of debt for $375 per month over 36 months? In my professional opinion, not a chance!
WHY SETTLEMENT PLANS ALMOST NEVER WORK
- You don’t have 36 months to settle debts. These programs require that you stop paying the credit card account and start paying into their settlement escrow account. After 6 to 12 months of no payments, banks file collection lawsuits or they sell the accounts to aggressive junk debt buyers.
- Settlement Fees: Debt settlement companies typically charge a 15% to 20% settlement fee, so not only do you have to save up for the settlement but you need to save up to pay the settlement fees.
- Accruing Penalties & Fees: While you are paying money into the debt settlement escrow account, interest and penalties are racking up on the debt. So even if you settle the debt for 50 cents on the dollar, you are settling a higher account balance.
- Tax Consequenses: When credit card companies settle debts they usually issue a 1099-C tax form to the IRS to report what you did not pay. That can result in additional income taxes you must pay.
- Garnishments: When the banks obtain judgments they may garnish up to 25% of your paycheck. That’s commonly when I meet new customers–when their paychecks get garnished and it becomes painfully obvious that the debt settlement program has failed.
SUCCESS RATE OF DEBT SETTLEMENT
You will never find a debt settlement company that publishes its success rate. There is no standard for measuring success, no auditing of cases, no public records available to audit, and no public reporting requirement at all. It is commonly believed that the success rate of debt settlement is below 10%. Some have said the success rate is as low as 1%.
Jeff Meeks, a former Vice President of Recovery Operations for WaMu Card Services, had this to say about the debt settlement industry:
I have had numerous DSC’s admit they have no intention of settling debt and in fact it is counter productive to their purpose to do so; their main purpose being to enroll consumers, collect fees, and provide such poor customer service and results that most consumers drop from the program and thereby leave the DSC with thousands of dollars in unearned benefit.
The Federal Trade Commission has also written a great article warning consumers about the risks of debt settlement. An important FTC study showed that the success rate of debt settlement is less than 10%.
NEBRASKA DECEPTIVE TRADE ACT
The Nebraska Deceptive Trade Act states that a person engages in a deceptive trade practice when they make “false or misleading statements of fact concerning the reasons for, existence of, or amounts of price reductions.” Neb. Rev. Stat. 87-302.
It is a also deceptive when a business “represents that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities that they do not have.”
Debt settlement advertisements make false representations about price reductions. They represent the ability to achieve results they clearly do not obtain. The advertisements are misleading. Representing that $25,000 of credit card debt can be settled for 36 monthly payments of $375 monthly is misleading. Representing that these programs work when the success rate is less than 10% is misleading.
If you have been mislead by a debt settlement company about the success rate of their program you may have a claim for damages under the Nebraska Deceptive Trade Act, including a claim for attorney fees.
Jordan E. Bublick is a North Miami Bankruptcy Lawyer - North Miami - Aventura Office - (305) 891-4055
A short sale involves the mortgage lender agreeing to allow a homeowner to sell his real property for a price less than enough to payoff the mortgage in full. That is, the lender agrees to release its mortgage lien on the property for an amount less than a full pay-off so as to allow the sale of the real estate to proceed. As the net proceeds of the sales price is less than the full amount due on the mortgage lien, the mortgage holder must agree to accept a "short" payoff in exchange for release of its mortgage lien.
Implications
Many homeowners facing foreclosure consider a "short sale", but have a difficult time understanding all of its implications. Some property owners that attempt to achieve a short sale are not successful in their efforts. Many seem to indicate frustration in the attempt to communicate with the mortgage lender(s) and/or actually complete a short sale. In addition, many lenders may be under contractual or regulatory restrictions that may not permit them to agree to a short sale.
Apparently the most difficult item in the short sale process is communicating with the lender and any second mortgage holder, such as the holder of a "home equity loan." In addition to the agreement of the first mortgage holder, the agreement of any junior mortgage holders must also be obtained. Outstanding judgments or tax liens may also be an issue as the buyer would need to receive clear title.
The process of obtaining a short sale usually takes several weeks to pursue and one needs to furnish substantial documentation, including personal financial information such as paycheck stubs, bank statements, 401(k) statements, and tax returns. One may also need to furnish information about a hardship.
Release from Liability
One of the most important issues in the short sale is whether the homeowner is actually released from liability for the "short" or unpaid amount. If the mortgage company and/or the second mortgage company do not release a person from liability for the unpaid portion, the benefit of a short sale to a homeowner may be questioned.
Jordan E. Bublick - Miami Bankruptcy Lawyer - North Miami & Kendall Offices - (305) 891-4055 - www.bublicklaw.com
Jordan E. Bublick is a North Miami Bankruptcy Lawyer - North Miami - Aventura Office - (305) 891-4055
A short sale involves the mortgage lender agreeing to allow a homeowner to sell his real property for a price less than enough to payoff the mortgage in full. That is, the lender agrees to release its mortgage lien on the property for an amount less than a full pay-off so as to allow the sale of the real estate to proceed. As the net proceeds of the sales price is less than the full amount due on the mortgage lien, the mortgage holder must agree to accept a "short" payoff in exchange for release of its mortgage lien.
Implications
Many homeowners facing foreclosure consider a "short sale", but have a difficult time understanding all of its implications. Some property owners that attempt to achieve a short sale are not successful in their efforts. Many seem to indicate frustration in the attempt to communicate with the mortgage lender(s) and/or actually complete a short sale. In addition, many lenders may be under contractual or regulatory restrictions that may not permit them to agree to a short sale.
Apparently the most difficult item in the short sale process is communicating with the lender and any second mortgage holder, such as the holder of a "home equity loan." In addition to the agreement of the first mortgage holder, the agreement of any junior mortgage holders must also be obtained. Outstanding judgments or tax liens may also be an issue as the buyer would need to receive clear title.
The process of obtaining a short sale usually takes several weeks to pursue and one needs to furnish substantial documentation, including personal financial information such as paycheck stubs, bank statements, 401(k) statements, and tax returns. One may also need to furnish information about a hardship.
Release from Liability
One of the most important issues in the short sale is whether the homeowner is actually released from liability for the "short" or unpaid amount. If the mortgage company and/or the second mortgage company do not release a person from liability for the unpaid portion, the benefit of a short sale to a homeowner may be questioned.
Jordan E. Bublick - Miami Bankruptcy Lawyer - North Miami & Kendall Offices - (305) 891-4055 - www.bublicklaw.com
In re Barrett, ND California 2016, lawyer debtor
The United States Bankruptcy Court for the Northern District of California issued an interesting ruling that discharged over a quarter millions dollars of federal student loan debt for a 56-year-old securities law attorney (In re Barrett, Case No 14-43516).
Kevin Barrett is a single man who has been a licensed attorney since 1987. He is in good health and has no dependents. At one point he earned as much as $165,000 per year as a securities lawyer, but that income ended in 2007. He earned very little for the next 4 years. In 2011 he was hired for $98,000 per year by another firm until August of 2013 when he was terminated. Since that time he has struggled to earn more than $10,000 per year in his own practice.
The debtor did not live extravagantly. He paid $750 per month for rent and drove an older car. He had no savings or retirement account.
The debtor had paid nearly $40,000 in student loan payments over the years.
The Department of Education objected to the discharge since Barrett never applied for one of their Income Based Repayment (“IBR”) plans. Under such plans a debtor’s payment is pegged to their actual current income level, and in Barrett’s present condition the payment would have been zero. However, the bankruptcy court rejected this argument.
While the DOE correctly argues that this court must consider [the debtor’s] failure to apply for one of its income-based repayment plans, such inaction is insufficient, standing alone, for this court to find against him.
Given the debtor’s age and present lack of income to make a meaningful payment of any amount and the significant income tax consequence of forgiving such a large debt, the California bankruptcy court considered the income-based payment plan to be impractical.
When seeking to discharge student loans in bankruptcy it is helpful and appropriate to have a record of applying for the various Income-Based Repayment plans available. Such applications demonstrate the good faith courts generally demand as a prerequisite to entertaining a hardship discharge. However, when it comes to older debtors who have in good faith attempted to improve their circumstances while paying what they can on school debts over an extended period of time, the failure to apply for an IBR is not always conclusive.
Image courtesy of Flickr and Harvard Law Record.
Invest Wisely I have to share with you a cautionary tale of a prior client who had an investment in a real estate property on the South side of Chicago. The neighborhood in which he invested was not great. In fact, it’s one of the two or three neighborhoods in Chicago that has not seen+ Read More
The post When Bankruptcy Is Not Enough: Be Careful When Investing In Suspect Real Estate appeared first on David M. Siegel.
It’s amazing to me that people are worried about getting credit before they even completed a bankruptcy case. This is due in fact based upon Americans desire and obsession for credit. After all, credit is what more than likely got the person into financial problems to begin with. Now there are other causes of bankruptcy+ Read More
The post How Soon Will I Get Credit After Filing Bankruptcy? appeared first on David M. Siegel.
Problems Getting Paid In The Past Over the past 20 years, I have been searching for the reason or reasons why bankruptcy judges make it so difficult for bankruptcy attorneys to get paid in Chapter 13 consumer bankruptcy cases. This goes all the way back to the early 1990’s when some judges would simply not+ Read More
The post Some Judges Making It Difficult For Bankruptcy Attorneys To Get Their Fees Ordered appeared first on David M. Siegel.
Updated daily, this blog will keep you informed on the latest bankruptcy news! 
Learn more about how Bankruptcy works and what you need to know.